Arbeitspapier
Correlation changes between the risk-free rate and sovereign yields of euro area countries
We study correlations between the risk-free rate and sovereign yields of ten euro area countries using smooth transition conditional correlation GARCH (STCC-GARCH) specifications, controlling for credit risk in mean and variance equations and conditioning non-linearly to liquidity risk. Correlations are state-dependent and heterogeneous across jurisdictions. Using panel vector autoregression models, we identify the macro factors influencing the correlations: interbank credit risk, the Greek crisis, and break-up risk. We show that the European Central Bank’s asset purchase programmes helped restore the pass-through relationship. We also make a methodological contribution by estimating all STCC-GARCH parameters at once and introducing an STCC-GARCHX.
- ISBN
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978-92-899-2227-2
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 1979
- Classification
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
International Financial Markets
- Subject
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euro area
government bonds
monetary policy
smooth transition models
- Event
-
Geistige Schöpfung
- (who)
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De Santis, Roberto
Stein, Michael
- Event
-
Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
-
2016
- DOI
-
doi:10.2866/850460
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- De Santis, Roberto
- Stein, Michael
- European Central Bank (ECB)
Time of origin
- 2016
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